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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 30, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-11438
BURR-BROWN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 86-0445468
(State of Incorporation) (IRS Employer I.D. No.)
6730 South Tucson Boulevard
Tucson, Arizona 85706
(Address of principle executive offices)
(520) 746-1111
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, not including shares held in treasury, as of the close of the
period covered by this report.
Common Stock, $0.01 par value 16,070,958 Shares
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<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page #
Item 1 FinancialStatements (Unaudited)
Consolidated Statements of Income,
Quarters Ended March 30, 1996 and April 1, 1995 3
Consolidated Balance Sheets,
March 30, 1996, and December 31, 1995 4
Consolidated Statements of Cash Flows,
Quarters Ended March 30, 1996 and April 1, 1995 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11: Computation of Consolidated
Earnings Per Share 9
(b) Reports on Form 8-K: The Company did not
file any reports on Form 8-K during the quarter
ended March 30, 1996
SIGNATURES
Signature Page 10
<PAGE>
PART I. FINANCIAL INFORMATION
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
QUARTERS ENDED
Mar. 30, Apr. 1,
1996 1995
<S> <C> <C>
Net Revenue $61,174 $ 59,547
% increase in revenue over prior year 3% 26%
Cost of Sales 30,497 31,361
Gross Margin 30,677 28,186
% of revenue 50% 47%
Expenses:
Research & Development 7,343 5,828
% of revenue 12% 10%
Sales, Marketing, General and Administrative 14,829 15,567
% of revenue 24% 26%
Total Operating Expenses 22,172 21,395
% of revenue 36% 36%
Income from Operations 8,505 6,791
% of revenue 14% 11%
Interest Expense 198 283
Gain from Sale of Subsidiary (6,680) -
Other (Income) Expense (1,121) 128
Income Before Income Taxes 16,108 6,380
% of revenue 26% 11%
Provision for Income Taxes 4,510 1,723
Effective Tax Rate 28% 27%
Net Income $11,598 $ 4,657
% of revenue 19% 8%
% increase in net income over prior year 149% 168%
Earnings per Common Share $ 0.69 $ 0.31
Shares used in per common share calculation 16,931 14,805
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
Mar. 30, Dec. 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 29,838 $ 42,477
Short-Term Investments 63,971 43,738
Trade Receivables 49,150 55,713
Inventories 49,358 47,852
Other 8,760 6,463
Total Current Assets 201,077 196,243
Land, Buildings and Equipment
Land 3,387 3,393
Buildings and Improvements 23,549 23,294
Equipment 100,084 100,812
127,020 127,499
Less Accumulated Depreciation (76,405) (76,075)
50,615 51,424
Other Assets 3,831 4,582
$255,523 $252,249
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 15,946 $ 17,904
Accounts Payable 18,625 17,359
Accrued Expenses 9,032 8,703
Accrued Employee Compensation and Payroll Taxes 5,528 8,929
Deferred Profit from Distributors 5,740 6,198
Income Taxes Payable 8,993 6,092
Current Portion of Long-Term Debt 948 1,150
Total Current Liabilities 64,812 66,335
Long-Term Debt 1,181 1,808
Deferred Gain 2,245 2,619
Deferred Income Taxes 435 159
Other Long-Term Liabilities 1,787 2,183
Commitments and Contingencies - -
Stockholders' Equity
Preferred Stock - -
Common Stock 166 165
Additional Paid-In Capital 89,925 89,698
Retained Earnings 99,386 87,801
Equity Adjustment From Foreign
Currency Translation 2,613 3,162
Treasury Stock (7,027) (1,681)
185,063 179,145
$255,523 $252,249
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
QUARTERS ENDED
Mar. 30, Apr. 1,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 11,598 $ 4,657
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 3,255 2,903
Amortization of Deferred Gain (374) (374)
Provision for Losses on Inventories 2,495 1,461
Benefit from Deferred Income Taxes (1,389) (627)
Increase (Decrease) in Deferred Profit
from Distributors (458) 311
Gain from Sale of Subsidiary (6,680) -
Other (87) 61
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Trade Receivables 2,304 (6,091)
(Increase) Decrease in Inventories (7,404) 50
(Increase) Decrease in Other Assets (1,032) (1,162)
Increase in Accounts Payable 2,916 4,489
Increase (Decrease) in Accrued Expenses
and Other Liabilities (91) 4,748
Net Cash Provided By Operating Activities 5,053 10,426
INVESTING ACTIVITIES:
Purchases of Short-Term Investments (20,233) -
Purchases of Land, Buildings and Equipment (6,614) (5,784)
Proceeds from Sale of Equipment 332 48
Proceeds from Sale of Subsidiary 12,804 -
Net Cash Used in Investing Activities (13,711) (5,736)
FINANCING ACTIVITIES:
Proceeds from Short-Term and Long-Term Borrowings 1,005 -
Payments of Short-Term and Long-Term Borrowings (261) (377)
Payments for Capital Stock Activity, Net (5,131) (213)
Net Cash Used In Financing Activities (4,387) (590)
Effect of Exchange Rate Changes on Cash 406 (328)
Increase (Decrease) in Cash and Cash Equivalents (12,639) 3,772
Cash and Cash Equivalents at Beginning of Year 42,477 9,925
Cash and Cash Equivalents at End of Three Months $ 29,838 $13,697
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the quarter ended March 30, 1996, are not necessarily indicative of
the results to be expected for the year ending December 31, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report or Form 10-K
for the year ended December 31, 1995, filed with the Securities and
Exchange Commission.
On April 21, 1995, the Company's Board of Directors declared a three-for-
two stock split in the form of a stock dividend to stockholders of record as of
May 5, 1995. Comparative period earnings per common share and shares
used in the per common share calculation have been adjusted to reflect this
three-for-two stock split.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Mar. 30, Dec. 31,
1996 1995
<S> <C> <C>
Raw Material $11,880 $13,842
Work-In-Process 18,967 17,830
Finished Goods 18,511 16,180
-------- --------
$49,358 $ 47,852
======== =========
</TABLE>
3. TAX RATE
The effective tax rate for 1996 is expected to be 28%. The 1996 tax rate has
been favorably impacted by the expected significant reduction of the deferred
tax asset valuation allowance as benefits are expected to be realized given
the continued profitability of the Company throughout the world.
4. CONTINGENCIES
The Company is involved in a litigation matter whereby the plaintiffs are
charging that they and their respective properties are damaged from the
release of contaminants into the ground water. Based on investigations to
date, management does not believe the Company contributed to the alleged
contamination and therefore is of the opinion that the disposition of this
claim will not result in any material change in the Company's financial
condition, results of operations or liquidity.
5. SALE OF SUBSIDIARY
On March 12, 1996, the Company completed the sale of its interest in PCC to
a subsidiary of Charter Power Systems Incorporated for $12.8 million in
cash. PCC produces battery chargers for cellular telephones and modular DC
to DC converters used in a variety of applications. During 1995, PCC
accounted for 9.5% of the Company's revenue and 3% of its profits. PCC
generated 4.9% of first quarter 1996 revenue and made no contribution to net
income. Prior to the sale, PCC employed 440 people, or 21% of Burr-
Brown's total world wide work force. The sale of PCC will allow the
Company to better focus resources on its primary business of analog and
mixed signal integrated circuits.
<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis may contain forward-looking statements
that involve risks and uncertainties. Factors that might cause actual results
to differ from those currently anticipated include, but are not limited to,
those discussed under "Factors Affecting Future Results."
RESULTS OF OPERATIONS
Net income for the first quarter of 1996 was $11.6 million or $.69 per share.
First quarter net income is comprised of income from recurring operations of
$6.8 million after giving offsets to income taxes or $.41 per share and a non-
recurring gain of $4.8 million after giving offsets to income taxes or $.28 per
share relating to the sale of its Power Convertibles Corporation (PCC)
subsidiary. Compared to the first quarter of 1995, net income from recurring
operations increased by 45.8 % and was up 32.3% on a per share basis.
Higher revenue, improved gross profit, increased income from investments
and strict control of operating expenses drove this improvement in
profitability.
Revenue for the first quarter was $61.2 million as compared to $59.5 million
a year ago, an increase of 2.7% and down 12.4% from $69.8 million in
fourth quarter 1995. Revenue for the core analog and mixed signal
integrated circuit business increased by 10% over last year's first quarter
while that of the systems business units declined. During the first quarter,
the Company completed the sale of its interest in its PCC subsidiary. Sales
excluding the PCC unit were $58.2 million, up 11.5% from $52.1 million in
first quarter a year ago and down 11% from $65.4 million in the preceding
quarter.
Gross profit as a percentage of sales continued to improve as operating
expenses as a percentage of sales declined during the quarter. At 50.1% of
sales, gross profit increased by 2.8 percentage points over the same quarter a
year ago and is up .7 percentage points from the preceding quarter.
Manufacturing cost reduction has resulted in continued sequential
improvement in the gross profit ratio despite a decline in revenue. Customer
pricing has remained essentially stable over the past year.
Total operating expenses at $22.2 million were slightly lower than the $22.4
million of fourth quarter 1995, even though Research & Development
(R&D) spending increased substantially. R&D spending increased 16.8%
sequentially and 25.9% over the first quarter 1995. R&D expense increased
due to the addition of technical personnel and higher spending relating to
new product and new manufacturing process development. Operating expenses
increased slightly over the $21.4 million of first quarter 1995.
Sales,Marketing and General and Administrative (SMG&A) expenses were
reduced by 7.8% from the preceding quarter and by 4.7% over the year ago
quarter. These changes represent the continuation of a strategy to reduce the
SMG&A expense while increasing R&D investments as a primary driver of
revenue growth. Reductions in SMG&A were achieved through the
consolidation of certain administrative activities, expanded use of third party
distributors and tight expense control.
Interest income of $1 million was generated on the $93.8 million of cash,
cash equivalents and short-term investments held by the Company during the
first quarter. This compares to almost no interest income in the first
quarter a year ago. The first quarter tax rate was 28% as compared to 27% for
1995. The 1996 tax rate has been favorably impacted by the expected
significant reduction of the deferred tax asset valuation allowance as
benefits are expected to be realized given the continued profitability of the
Company throughout the world.
On March 12, 1996, the Company completed the sale of its interest in PCC to
a subsidiary of Charter Power Systems Incorporated for $12.8 million in
cash. PCC produces battery chargers for cellular telephones and modular DC
to DC converters used in a variety of applications. During 1995, PCC
accounted for 9.5% of the Company's revenue and 3% of its profits. PCC
generated 4.9% of first quarter 1996 revenue and made no contribution to net
income. Prior to the sale, PCC employed 440 people, or 21% of Burr-Brown's
total world wide work force. The sale of PCC will allow the Company to
better focus resources on its primary business of analog and mixed signal
integrated circuits.
<PAGE>
FOREIGN OPERATIONS
International markets constitute a majority source of the Company's
revenues. The resulting transactions have exchange rate fluctuation risk
associated with them. Exchange rate risk is reduced through the natural
hedges afforded by the Company's foreign operations, dollar-based or dollar-
indexed sales transactions and the purchase of foreign contracts to hedge its
foreign currency net accounts receivable due from the international
subsidiaries. The forward contracts are in three primary currencies:
Japanese Yen, British Pounds and German Marks. Exchange rate fluctuations
can also affect the Company's reported revenue to the extent that the
international subsidiaries' sales are in non-indexed foreign currencies but
reported in the consolidated financial statements in U.S. dollars using a
weighted average exchange rate. When compared to the prior year, the effect
of foreign exchange rate changes had a minimal impact on first quarter 1996
revenue and overall financial results.
FACTORS AFFECTING FUTURE RESULTS
The Company's future operating results cannot necessarily be predicted
based on past performance due to a number of factors affecting the Company
and the semiconductor industry. The semiconductor industry is influenced
by rapidly changing technology, the supply and price of raw materials,
increased competition, price erosion, international monetary and economic
conditions generally. The Company's future success also rests in its ability
to make new product introductions that are timely, achieve market acceptance
and produce acceptable margins. Although the Company believes it has
adequate resources to sustain current operations, its financial results may be
significantly affected by the above and other factors.
FINANCIAL CONDITION
Cash, cash equivalents and short-term investments increased by $7.6 million
or 8.8% during first quarter to $93.8 million. $12.8 million was realized
from the sale of PCC. During the quarter, 252,500 shares of Burr-Brown
stock were repurchased at a cost of $5.3 million. This represents partial
execution of plans to repurchase up to 1 million shares of stock to take
advantage of prices considered to be favorable to the Company's stockholders.
$5 million of cash was generated from operations as compared to $10.4 million
in the first quarter of 1995. Total cash, cash equivalents and short-term
investments have increased by $80.1 million or 585% from the first quarter a
year ago.
Planned die bank build and finished goods safety stock replenishment
resulted in net inventory increasing by $1.5 million or 3.1% to $49.4 million
during the quarter. Expenditures for plant and equipment totaled $6.6
million compared to $5.8 million for the same period last year. Budgeted
capital investments primarily target capacity expansion at selected
bottleneck points in manufacturing modernization of manufacturing processes
and an enterprise-wide upgrade of information systems. Total 1996 expenditures
are anticipated to range between $30 million and $45 million.
At first quarter end 1996, total debt was $18.1 million of which $2.1 million
was term debt. This compares to $20.9 million at 1995 year end. Most of
this debt was held internationally and represented an interest rate arbitrage
situation for the Company. In addition to term debt, credit facilities of
approximately $58 million with both domestic and international banks were
available to the Company of which approximately $16 million or 27% was
utilized. As of January 31, 1996, the Company renegotiated a $15 million
revolving line of credit which expires in 1998. The current ratio improved
from 2.96 at year end to 3.1 in first quarter. The debt to equity ratio also
improved from year end from .12 to .10.
Given both the current cash position and available credit facilities,
Management believes the Company has sufficient capital resources
available to meet its requirements for the foreseeable future.
The Company is involved in a litigation matter whereby the plaintiffs are
charging that they and their respective properties are damaged from the
release of contaminants into the ground water. Based on investigations to
date, management does not believe the Company contributed to the alleged
contamination and therefore is of the opinion that the disposition of this
claim will not result in any material change in the Company's financial
condition, results of operations or liquidity.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit 11
BURR-BROWN CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED EARNINGS PER SHARE
(Unaudited)
Earnings per share are computed using the weighted average number of
shares outstanding plus incremental shares issuable upon exercise of
outstanding options under the treasury stock method.
<TABLE>
<CAPTION>
QUARTERS ENDED
Mar. 30, Apr. 1,
1996 1995 (1)
<S> <C> <C>
INCOME:
Net Income $ 11,598,000 $ 4,657,000
PRIMARY EARNINGS PER SHARE:
Weighted Average Number of Shares
Outstanding 16,225,000 14,340,000
Net Effect of Dilutive Stock Options
Based on the Treasury Stock Method
Using the Average Market Price of
Common Stock 706,000 465,000
Common Stock and Common Stock Equivalents 16,931,000 14,805,000
Primary Earnings Per Share $0.69 $0.31
FULLY DILUTED EARNINGS PER SHARE:
Weighted Average Number of Shares
Outstanding 16,225,000 14,340,000
Net Effect of Dilutive Stock Options
Based on the Treasury Stock Method
Using the End of Period Market Price
of Common Stock, if Higher Than Average 706,000 606,000
Common Stock and Common Stock Equivalents 16,931,000 14,946,000
Fully Diluted Earnings Per Share $0.69 $ 0.31
- -----------------------------------------------------
<FN>
(1) COMMON SHARE INFORMATION WAS RESTATED TO REFLECT A 3-FOR-2 STOCK SPLIT
EFFECTIVE MAY, 1995.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BURR-BROWN CORPORATION
Registrant
By: SYRUS P. MADAVI JOHN L. CARTER
Syrus P. Madavi John L. Carter
President and Chief Executive Officer Executive Vice President and
Chief Financial Officer
Date: May 10, 1996 Date: May 10, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Syrus P. Madavi and John
Carter, his attorney-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this Report on Form 10-K, and to
file the same, with the exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the Requirements of the Securities and Exchange Act of 1934
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Title Date
/s/SYRUS P. MADAVI President and Chief May 10, 1996
Syrus P. Madavi Executive Officer
/s/JOHN L. CARTER Executive Vice President and May 10, 1996
John L. Carter Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/THOMAS R. BROWN Chairman of the Board May 10, 1996
Thomas R. Brown, Jr.
/s/THOMAS J. TROUP Vice Chairman of the Board May 10, 1996
Thomas J. Troup
/s/FRANCIS J. AGUILAR Director May 10, 1996
Francis J. Aguilar
/s/JOHN S. ANDEREGG, JR. Director May 10, 1996
John S. Anderegg, Jr.
/s/MARCELO A. GUMUCIO Director May 10, 1996
Marcelo A. Gumucio
/s/JAMES A. RIGGS Director May 10, 1996
James A. Riggs
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEETS, AND CONSOLIDATED
STATEMENTS OF CASH FLOWS FOUND ON PAGES 3, 4, AND 5, RESPECTIVELY, OF THE
COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-30-1996
<CASH> 29838
<SECURITIES> 0
<RECEIVABLES> 49,150
<ALLOWANCES> 1,398
<INVENTORY> 49,358
<CURRENT-ASSETS> 201,077
<PP&E> 127,020
<DEPRECIATION> 76,405
<TOTAL-ASSETS> 255,523
<CURRENT-LIABILITIES> 64,812
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 184,897
<TOTAL-LIABILITY-AND-EQUITY> 255,523
<SALES> 61,174
<TOTAL-REVENUES> 61,174
<CGS> 30,497
<TOTAL-COSTS> 30,497
<OTHER-EXPENSES> 22,172
<LOSS-PROVISION> 57
<INTEREST-EXPENSE> 198
<INCOME-PRETAX> 16,108
<INCOME-TAX> 4,510
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,598
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
